The Latest
Opinion

Beyond backtests: considering the robustness of smart beta

Systematic equity investment strategies – so-called smart beta strategies – are usually marketed on the basis of outperformance. However, it is important to recognise that performance analysis is typically conducted on backtests that apply the smart beta methodology to historical stock returns. Concerning actual investment decisions, a relevant question, therefore, is how robust the outperformance […]
Opinion

Capturing true geographic exposures in risk reporting

New research by EDHEC-Risk Institute questions the usefulness of analysing geographic equities exposures based on the stock’s place of listing, incorporation or headquarters. Head of applied research, Felix Goltz, suggests that in a globalised marketplace, a more meaningful analysis of geographic risk exposures, and performance attribution, comes from looking at geographic segmentation data including total sales […]
Opinion

How to hedge long-term inflation-linked liabilities without inflation-linked instruments

Given the capacity constraints on local inflation-linked bond markets, what are other options for hedging long-term inflation-linked liabilities? This is a question Ontario Teachers’ Pension Plan has been deliberating on as it supports an academic chair at EDHEC-Risk Institute with a focus on analysing the design of novel forms of liability-hedging portfolios that do not […]
Research

Benchmarking infrastructure a step closer

The first valuation and risk measurement model created for unlisted infrastructure debt has been developed, with the release of a paper showing the valuation of illiquid infrastructure project debt, taking into account its illiquidity and the absence of market price feedback, can be done using advanced, state-of-the-art structural credit risk modelling. The paper by EDHEC-Risk […]
Opinion

Risk parity – the benefits of a conditional approach

Risk parity is a meaningful and robust approach for building well-diversified portfolios, but it relies on historical volatility estimates, which penalises upside risk as well as downside risk and leads to a massive overweighting of bonds versus equities, even in a low yield environment. The authors from EDHEC Risk-Institute build the case for an alternative […]
Opinion

Evolution in risk reporting for sophisticated institutional investors

Risk reporting is increasingly regarded by sophisticated investors as an important ingredient in their decision-making process, authors from EDHEC argue that  the effective number of (uncorrelated) bets could be a useful risk indicator to be added to risk reports for equity and policy portfolios. Risk reporting is increasingly regarded by sophisticated investors as an important […]
Analysis

Investors ignore liability matching at their peril

Two high profile pension funds, ATP of Denmark and HOOPP of Canada, have been very successful in managing their assets in two distinct portfolios. But the practice of fund separation, a portion of the portfolio for liability hedging and another for alpha generation, is not common in pension management. It should be. For these two […]
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